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Japan-Update

Lion seen roaring to third year of record profit

New toothpaste, body wash helped spiff up margins

Lion body wash for sale at a Japanese drugstore.

TOKYO -- Health and beauty goods maker Lion's operating profit likely jumped roughly 50% to a third straight record high in the year ended Dec. 31, driven by still-growing domestic demand and new products. 

The Japanese company is expected to report a group operating profit of around 25 billion yen ($214 million), beating its 23.5 billion yen forecast and breaking the 20 billion yen barrier for the first time since going public in 1949. Its operating margin apparently set another record by surpassing 6%.

Lion's domestic consumer goods business in particular drove operating profit. The company released a steady stream of such new offerings as gum-disease-fighting toothpaste, moisturizing body soap and stain-softening laundry detergent. These functional products commanded higher unit prices, helping Lion absorb increased advertising costs.

Sales likely grew 3% to an all-time high of slightly more than 390 billion yen. Overseas business, accounting for nearly 30% of the total, also fared well, helped by more aggressive marketing. In China, more dental care goods were sold online. In Thailand, South Korea, Malaysia and other parts of Asia, Lion saw growth in such items as toothpastes, hand soaps and detergents.

Further sales and profit growth is seen in 2017. Lion will likely introduce more high-value-added products in fields where it holds a high domestic share, such as dental care, over-the-counter drugs and hand soaps. Rising crude prices may reverse the gains seen from cheap raw materials, but these higher costs should be absorbed by increased revenue growth. Bigger overseas market share is also a possibility.

Japan's market for daily necessities likely grew roughly 5% in 2016, for a fifth straight year of gains, industry estimates show. Demand rose as the number of households increased and health-consciousness grew. Competition eased among such distributors as drugstores, which reduced pressure to lower prices. Cheaper raw materials prices also provided a tailwind.

(Nikkei)

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